District Court (Cal.) Finds that De-Minimus Class Recovery Due to FDCPA’s $500,000 Penalty Cap Does Not Defeat Class Certification

In Jacobson v. Persolve, LLC, No. 14-CV-00735-LHK, 2015 WL 3523696, at *10 (N.D. Cal. June 4, 2015), Judge Koh granted, in part, class certification in an FDCPA class action despite the fact that the FDCPA’s $500,000 penalty cap would result in deminimus recover to the large number of individual class members.

In opposition, Defendants do not dispute that individual class members are most likely unaware of their claims or that recoveries are usually too small to incentivize individual suits. Nor do Defendants contest that class litigation would be more efficient than alternative methods. Instead, Defendants contend that Plaintiff cannot show that class litigation is superior because Defendant Persolve, LLC has a negative net worth and class litigation would result in zero recovery for class members.² As to Defendant Stride Card, Defendants contend that any recovery would be de minimis because Stride Card’s net worth is less than $35,000.³ Opp. at 7. Under the FDCPA, individual plaintiffs can recover actual damages and up to $1,000 in additional damages. 15 U.S.C. § 1692k(a)(1)–(2)(A). In a class action under the FDCPA, each named plaintiff may seek up to $1,000 in additional damages, but the class recovery cannot “exceed the lesser of $500,000 or 1 per centum of net worth of the debt collector.” Id. § 1692k(a)(2)(B). According to Defendants, because Defendants have little or no net worth, class litigation is not superior to individual litigation, as 1 percent of Defendants’ negative or de minimis net worth would result in little or no recovery for the class. The Court finds this argument unpersuasive for two reasons.  . . . *8 Second, as Plaintiff correctly notes, the likelihood of de minimis class recovery under the FDCPA is not a bar to class certification. While the Ninth Circuit has not explicitly addressed de minimis recoveries in the FDCPA context, the Court finds the Seventh Circuit’s reasoning in Mace v. Van Ru Credit Corp., 109 F.3d 338, 344–45 (7th Cir.1997), to be persuasive. The Seventh Circuit explained: [W]e believe that a de minimis recovery (in monetary terms) should not automatically bar a class action. The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone’s (usually an attorney’s) labor. True, the FDCPA allows for individual recoveries of up to $1000. But this assumes that the plaintiff will be aware of her rights, willing to subject herself to all the burdens of suing and able to find an attorney willing to take her case. These are considerations that cannot be dismissed lightly in assessing whether a class action or a series of individual lawsuits would be more appropriate for pursuing the FDCPA’s objectives. Id.; see also Kalish v. Karp & Kalamotousakis, LLP, 246 F.R.D. 461, 464 (S.D.N.Y.2007) ($ 2.50 per class member); Warcholek v. Medical Collections Sys., Inc., 241 F.R.D. 291, 295–96 (N.D.Ill.2006) (certifying 23(b)(3) FDCPA class where defendant claimed negative net worth). In Mace, the Seventh Circuit concluded that even a recovery of only $ 0.28 per class member would not necessarily bar class certification. 109 F.3d at 344. Relying on similar logic, district courts in this circuit have certified FDCPA class actions where the estimated recovery per class member ranged from $ 0.00000111 to $11.28. See del Campo v. Am. Corrective Counseling Servs., Inc., 254 F.R.D. 585, 595–96 n.9 (N.D.Cal.2008) ($ 0.00000111 per class member); Abels, 227 F.R.D. at 546–57 ($ 0.25 per class member); Bogner v. Masari Investments, LLC, No. 8–1511, 2010 WL 2595273, at *2 (D. Ariz. June 24, 2010) (Docket No. 60, $11.28 per class member).  In opposition, Defendants rely on Kohlenbrener v. Dickinson, No. 94–4696, 1996 WL 131736, at *2 (N.D.Ill. Mar. 15, 1996), but that case is distinguishable. In Kohlenbrener, the court denied class certification where the plaintiff had failed to adduce any “proof that any of the defendants in th[e] case ha[d] a positive net worth.” Id. Here, in contrast, Plaintiff has put forth evidence of at least $1.2 million dollars in assets. Defendants also cite Bryant v. Bonded Account Serv./Check Recovery, Inc., 208 F.R.D. 251 (D.Minn.2000), but the Court finds Bryant unpersuasive. In Bryant, the court concluded that a class recovery of $17,500, or $100 per class member, was insufficient where the 175 absent class members could each recover up to $1,000 in individual actions. Id. at 260–61. The Bryant court did not consider the hurdles individual plaintiffs might face, including their lack of knowledge of existing claims, the possibility of smaller recoveries, and the difficulty of finding counsel. See id. Instead, the Bryant court assumed that the difference between certifying and not certifying an FDCPA class was the award of $17,500 for a class or $175,000 in individual claims. The Court is not persuaded, however, that denying class certification here would result in 459 plaintiffs bringing individual claims. See, e.g., Macarz v. Transworld Sys., Inc., 193 F.R.D. 46, 54–55 (D.Conn.2000) (concluding that “the vast majority, if not all, of those potential plaintiffs would fail to pursue” individual FDCPA claims if the court did not certify a class). FDCPA class actions exist precisely because individual claims are unlikely to be brought and aggregating claims incentivizes suits that produce the “deterrent and curative effect of eliminating abusive collection practices intended by Congress.” Id.; see also Mace, 109 F.3d at 344.  Furthermore, mandatory notice and opt-out provisions under Rule 23(c)(2) will protect the interests of those proposed class members that may wish to pursue individual claims. See Fed.R.Civ.P. 23(c)(2); Warcholek, 241 F.R.D. at 296. While Defendants contend that a class should not be certified if a high number of opt-outs are likely, Defendants have submitted no evidence indicating such opt-outs are likely and have not explained why the Court should expect many opt-outs. To the contrary, other courts have concluded that the small individual recoveries and difficulties of finding counsel willing to take on individual FDCPA claims on a contingency basis make individual claims unlikely. See, e.g., Mace, 109 F.3d at 344–45; Macarz, 193 F.R.D. at 54–55. Similarly, while the Court acknowledges the possibility that attorney’s fees may be greater than the class recovery, such an outcome is not necessarily at odds with the underlying goals of the FDCPA. As the Mace court recognized, the FDCPA provides for attorney’s fees because attorneys would otherwise have little incentive to take such cases, and the fees provision “makes the class action more likely to proceed, thereby helping to deter future violations.” 109 F.3d at 344. Here, the Court is not persuaded that a hypothetical attorney’s fees request by Plaintiff’s counsel renders the proposed class inferior to alternative methods of litigation.  Ultimately, the “unfortunate reality … that most of Defendant’s … FDCPA violations would probably go unnoticed absent this lawsuit” must be balanced against the possibility that any class recovery may be relatively minimal. Kalish, 246 F.R.D. at 464–65. In light of the probability that most individual plaintiffs are unaware of their claims and because of the small incentives for bringing individual FDCPA claims, the Court finds that class certification would be superior to any alternative, notwithstanding the possibility of a de minimis class recovery.

Judge Koh denied an FRCP 23(b)(2) class because, in part, the FDCPA does not provide for injunctive relief.

Plaintiffs cite various district court cases certifying Rule 23(b)(2) classes or hybrid 23(b)(2) and 23(b)(3)under the FDCPA, but the Court notes that none of those decisions actually concluded that the FDCPA authorizes any form of relief other than damages for private litigants. See Reply at 9–10 (citing; Bogner, 257 F.R.D. at 534; Schwarm v. Craighead, 233 F.R.D. 655, 663 (E.D.Cal.2006); Hunt, 241 F.R.D. at 512–13; Gonzales v. Arrow Fin. Servs., LLC, 233 F.R.D. 577, 582–83 (S.D.Cal.2006), aff’d on other grounds, 660 F.3d 1055 (9th Cir.2011); Ballard v. Equifax Check Servs., Inc., 186 F.R.D. 589, 596 (E.D.Cal.1999); Bracamonte v. Eskanos & Adler, et al., No. 03–1821, 2004 WL 1146624, at *4–5 (N.D.Cal. May 7, 2004)).  To the contrary, cases cited by Plaintiff that actually discuss the availability of equitable relief under the FDCPA noted that the FDCPA does not provide for injunctive relief. See del Campo, 254 F.R.D. at 583(“Plaintiffs fully concede that injunctive relief is not a remedy under the FDCPA. (Reply at 6.) Injunctive relief, however, is authorized under the [California Unfair Business Practices Act].”); Gammon v. GC Servs. Ltd. Partnership, 162 F.R.D. 313, 329 (N.D.Ill.1995) (“[T]his Court agrees with the conclusion in the above cases that injunctive relief is not available to [plaintiff] under the FDCPA. [Plaintiff] is therefore left with his claims for declaratory relief and statutory damages.”); Mann v. Acclaim Fin. Servs., Inc., 232 F.R.D. 278, 285–86 (S.D.Ohio 2003) (“[A]s a general matter, injunctive relief is not authorized in FDCPA cases. However, corresponding declaratory relief has been allowed in FDCPA cases.”); Tedrow v. Cowles, No. 6637, 2007 WL 2688276, at *8–9 (S.D.Ohio Sept. 12, 2007) (citing Mann, 232 F.R.D. at 285–86). The cases Plaintiff relies on, therefore, either involve a different statutory basis for injunctive relief, see del Campo, 254 F.R.D. at 583, or the courts concluded that the FDCPA provides for damages and declaratory relief but not injunctive relief. Del Campo is distinguishable, as there is no California Unfair Business Practices Act claim here and thus no alternative statutory basis for equitable relief, and the Court finds the remaining authority unpersuasive. Neither Plaintiff nor these decisions explain why the FDCPA’s explicit provision of a damages remedy to private litigants would preclude injunctive relief but somehow allow declaratory relief. In the absence of controlling Ninth Circuit authority, and in light of the uniform agreement by the other circuits, the Court concludes that neither injunctive nor declaratory relief is available to a private litigant under the FDCPA. As the Third Circuit explained in Weiss, the FDCPA “contains no express provision for injunctive or declaratory relief in private actions.” 385 F.3d at 341. Instead, the FDCPA provides only for damages and counsel fees as remedies in private actions. Id. In contrast, in administrative enforcement actions brought by the Federal Trade Commission, the Commission may pursue injunctive and declaratory relief. Id. (citing 15 U.S.C. § 16921). In light of this separate statutory scheme for enforcing the FDCPA, the Third Circuit concluded that Congress did not intend to provide private litigants with any remedy other than the one that Congress expressly provided: damages and fees. See id. The Court agrees, and therefore concludes that Plaintiff cannot seek declaratory relief under the FDCPA. See also Varnado v. Midland Funding LLC, 43 F.Supp.3d 985, 993 (N.D.Cal.2014) (dismissing requests for declaratory and injunctive relief because “[r]emedies for claims made under the FDCPA are limited to damages, attorney’s fees and costs”); Wyatt v. Creditcare, Inc., No. 04–3681–JF, 2005 WL 2780684, at *3 (N.D.Cal. Oct. 25, 2005) (“[Plaintiff] is no longer entitled to injunctive or declaratory relief … given that FDCPA remedies are limited to damages, attorney’s fees and costs.”).